| Chapter 7 is a 'liquidation' of nonexempt assets to | | | | jewelry only worth up to $1,000, a vehicle with |
| pay debts. In an orderly, court-supervised | | | | more than $2,400 of equity. The debtor is allowed |
| procedure, a court appointed trustee liquidates the | | | | to keep the cash value of Insurance policies. |
| non-exempt assets of the debtor's estate and | | | | Pensions under the Employee Retirement Income |
| makes distributions to creditors. In Chapter 7, the | | | | Security Act (ERISA) are fully exempted in |
| debtor selects property he/she is eligible to keep | | | | bankruptcy. Not only all public benefits, such as |
| from either a list of state exemptions or | | | | welfare, social security, and unemployment |
| exemptions provided in the Federal Bankruptcy | | | | insurance but also tools used on job and at least |
| Code. Although the debtor files a schedule C form | | | | 75% of wages are fully protected. |
| for property claimed as exempt, the property is | | | | To get exemption the debtor must file the |
| not exempt until the trustee files the property | | | | bankruptcy case in the state he/she lived in for |
| exemption report which actually divides the | | | | the 730 days (2 years) before filing; or the state |
| property as exempt or non-exempt. | | | | where he/she lived the majority of the 180 |
| Although state exemption laws are different from | | | | period preceding the 2-year period. Federal |
| state to state, these states typically allow the | | | | exemptions are retirement benefits (veteran's |
| debtor to keep these types of property: The | | | | benefits etc.), survivor's benefits (judicial center |
| debtor can exempt Up to $17,425 of equity in | | | | director's benefits, lighthouse worker's benefits |
| the home (homestead exemption). Some states | | | | etc.), death disability benefits (injury |
| have no homestead exemption; some allow | | | | compensations etc.) and miscellaneous (military |
| debtors to protect all or most of the equity in | | | | group insurance etc.). One must note that federal |
| their home. The debtor may be able to keep | | | | exemptions are not available for all states. |